00:00 Veronica
Veronica, I want to start with you. Were you surprised here by this weaker number and where do you think that weakness is coming from?
00:10 Veronica
Yeah, this is is definitely a weaker number and I think actually it’s not so much this July number but massive downward revisions to the June number that we had last month. Um so initially that was 147,000 payrolls in June, just 14k after these revisions. Um so this definitely does look like a labor market that is weakening. Um the unemployment rate is of course the most important number here. We did see that rise to 4.2%. That’s still in the range that it’s been in for the last year. Um but that happened despite the labor force participation rate falling more. Um this does look like a weakening labor market.
00:57 Host
Leslie, does this change the calculus for the Federal Reserve?
01:03 Leslie
You know, we’ve always had a the expectation that the Fed would cut in September. Um obviously after the FOMC meeting that probability, the market was projecting a much lower probability that would occur only, you know, down to about 40% and only about 33 basis points of cuts for 2025. I do think that number might shift that sort of uh rhetoric going forward and we do anticipate still that the Fed starts to cut in September with, you know, consecutive cuts thereafter leading to about 100 basis points of cuts in total. So I think that, you know, as as mentioned, I think some of these revisions are more much more than what people expected. You know, I think the if if the revisions weren’t uh so downward biased, you might have a different outcome. But again, when we look at some of these numbers when it comes to the, you know, unemployment rate and inflation, we’re really paying attention to the rate of change versus the absolute number. But I do I do think that this is, you know, a bit on the weaker side and it does put cuts back on the table.
02:35 Host
And those revisions that Leslie was mentioning by the way, I want to tell people what they were because if you look at the two month revision, it is a decrease of 258,000. Um so again that to your point kind of shows that yes, things were maybe a little weaker than they uh looked on the surface. Just to give you an example of what that means, it means what initially looked like 147,000 in June was actually only 14,000. So that is a big difference indeed. Um Steve, as you look at these numbers and you look at the market reaction here, um obviously we were already down because of the trade headlines which we’ll talk more about in a moment. Uh but now we’re seeing um, you know, sort of that reaction at the very least persist here. How are you thinking about these numbers?
03:53 Steve
Um well, Julie, the way I’m looking at them is you know, they’re not good. There’s no way to there’s no way to sugar coat that. The the the two the two month revision is just staggering. It basically wipes out um two months of what we thought were were healthy job gains. So um there were some comments this morning that that that was from um Bowman and Waller that that was the reason why they dissented was they thought the labor market was was worse than it was portraying and seems that it actually might be. Um so what this is doing here, so you’ve got you’ve got a real push pull. You know, the mark on one sense traders are just enamored with the idea of interest rate cuts. Um and this certainly has to raise the likelihood of cuts in the short in the in the near term. Um it was about 40% uh 40 45% for the September meeting. I haven’t been able to get a fresh look now, but it’s it’s got to be way up probably closer to 75 or so. Uh but one of the things about rate cuts that I’ve always said is be careful what you wish for if you’re a stock person because sometimes the need for rate cuts is that the economy requires it. And ultimately stocks do better in a stronger economy than than one that requires the intervention from the Fed. So there’s going to be a push pull today and I think I think right now the the push pull isn’t enough to to move us away from the a ready negative tone that we were in at least so far.
